Why The Credit Card Industry Despises Debt Settlement

It’s no secret that the credit card industry despises debt settlement companies. The main goal of Debt settlement is to drastically reduce the principal balance of a debtor in the fastest time possible. This is in direct conflict with the intent of credit card companies-to keep borrowers indebted for life.
Financial analyst R.K. Hammer revealed that credit card industry profit in 2010 was $18.5 billion! http://www.pivotalpayments.com/ca/industry-news/credit-card-industry-profits-rose-in-2010-but-future-challenges-loom-800516194/. About 65% of that profit is derived from interest payments. The remainder was collected from fees.
Credit card companies are experts at utilizing various strategies to keep consumers in debt for life. The higher the loan balance, the more interest they collect and the higher the profits. Credit counseling doesn’t reduce the principal balance, only the interest rate. Reducing the principal balance is the key to getting out of debt fast. That’s why the creditors would love it if every struggling debtor would enroll in a debt management program (they love a slow death!).
Since a debt settlement company’s main objective is to cut the loan balance in half, or more, credit card companies are fuming. Several credit card companies such as Discover publicly state that they don’t work with debt settlement companies. Wrong. I have yet to not settle with any credit card company. It all boils down to profitability. Credit card companies would rather collect 50 cents on the dollar as opposed to 15 cents that they would receive from collection agencies. Wouldn’t you?
In comparison to debt settlement, credit counseling is merely a diluted version of debt relief. After 12 years in the business, I still cannot comprehend why many debtors choose credit counseling over debt settlement. I’m sure the main reason is that they don’t know the facts.
Anyways, debt management works like this: shortly after enrolling in the program, the debtor receives counseling. Next, the credit counselor fills out a budget form and you pledge an oath that you will follow it. After that, the counselor will contact all your creditors of unsecured debt and negotiate a lower interest rate on your behalf. They will also try to get unpaid interest, fees and other penalties waived. Last, every month you send your monthly payment to the credit counseling organization until all your debt is paid.
It sounds good. It’s definitely better than continuing to make minimum payments. But there are secrets that C.C.C.S. and other credit counseling companies don’t tell you. According to a research study performed by T.A.S.C. (a debt settlement organization that sets quality standards for debt relief companies) approximately 79% of debt management enrollees in 2009 didn’t complete the program! http://www.tascsite.org/images/EditorImages/file/TASC_Comment_Letter.PDF.
The consequences of dropping out? The debtor is now back to square one and has ruined his credit. (Not to mention a loss of money due to the monthly payments and the fees that he made to the debt management company).
Why such a high fall-out rate? Because credit counseling is not flexible. If you miss just one payment, you may be booted from the program. Think about it. Most people that enroll in a C.C.C.S. program are not very proficient at budgeting. In addition, they are at the initial stage of a downward spiral. They have the best intentions of making their monthly payment, but sometimes a problem arises and consequently, their payment is late.
The average duration of a debt management program is about 5 years. In order to successfully complete the program, the debtor must make 60 payments on time. That’s very difficult to do for most debtors.
On the other hand, debt settlement payments are flexible to a certain extent-you pay what you can afford. This may explain why debt settlement has a much higher completion ratio than credit counseling. I’m not going off-topic by comparing debt management to debt settlement. Please do your own research and compare the two programs. This way you can see it for yourself.
The credit card industry is looking out for number one. I urge you to do the same. Is there a legitimate reason why credit card debtors should have to pay 30% interest? Is there a legitimate reason that you should still be making payments on those bell bottom jeans that you bought in 1969? It’s up to you to make your life less stressful. Good luck!

Summary: Find out the secret as to why the credit card industry despises the debt settlement industry. If you are considering a debt relief program, you need to know the answer.

KP: credit card industry

In order to successfully wipe-out your debt in the safest manner possible, It’s critical that you know the best way to get out of debt